While consumers continue to weather inflationary prices and rising interest rates, many have developed a negative outlook on the US economy. According to Numerator’s 2023 Economic Outlook Study, 63% of US consumers say they feel at least somewhat negatively about the current economy and 68% feel as though we are currently in a recession.
As consumer financial concerns rise, discretionary spending— particularly on non-essential durable goods— tends to decline. So how are economic conditions and prevailing negative sentiment impacting the Home Improvement industry? In Numerator’s latest Home Improvement report, we examined how current market dynamics are impacting home improvement across different consumer groups, and what shifts are occurring in the home improvement retail landscape as a result.
While nearly all consumers are facing some level of financial pressure from current economic conditions, they haven’t all been impacted equally. Our Economic Outlook Study identifies five distinct consumer segments based on consumers’ current economic sentiments, financial situations, and demographic markers like work status, purchase power and age.
Examining observed purchase behaviors across these segments shows that not all shoppers are reacting to the increased financial burden in the same way. Spending cuts in durable goods categories are evident across all groups, including two crucial Home Improvement sectors— Home & Garden and Tools (94 index vs. YA) & Home Improvement (91 Index). However, we can see that certain groups, like Future Fliers and Reserved Retirees, are not pulling back as much or at all.
The state of the economy and changing market dynamics have had a clear impact on consumer intentions surrounding their home project plans. Within the past year, 77% of homeowners have completed a DIY project and 50% have completed 3+ projects— up 5.3 pts from October 2022. Many of these consumers looking to complete their DIY projects are making their purchases in-store versus online, with leading retailers seeing market share gains from a year ago, including Lowe’s and Walmart in the Home & Garden and Tools & Home Improvement sector. This varies at department level, though, with specialty retailers like Sherwin Williams and Harbor Freight gaining market share in Paint and Wall Coverings and Tools, respectively.
A demographic breakdown of home buyers and sellers from the National Association of Realtors Generational Survey shows a clear generational difference between buyers and sellers, with Millennials accounting for 43% of home purchases between 2021 and 2022. As younger generations enter homeownership, their share of home improvement spend is increasing, with a 0.51% increase in Gen Z share of Home & Garden and Tools & Home Improvement spend and 0.15% increase in Millennial share of Tool spend.
Additionally, younger shopper generations have shifted out of major city centers due to the pandemic and entering new life stages. With these shifts, new groups of consumers and behaviors have been added to traditionally less populated markets, having a lasting impact on the retail environment.
One-third of prospective buyers in key markets (Los Angeles, Dallas, Chicago, and Miami) have decided to renovate versus purchasing a new home for cost savings. Within these areas, home improvement share in spend is increasing in regions that are seeing dips in home prices, such as Chicago and Dallas. Regionality also has a large impact on what departments are growing in the Home Improvement/Tools and Home & Garden sectors. Building Supplies is growing share in Los Angeles and Dallas, while Painting Supplies is growing in Miami and Kitchen & Dining is growing in Chicago. Learn more in from Numerator’s past webinar on this topic.
What does this mean for Home Improvement brands and retailers hoping to successfully navigate through the economic uncertainty? Inflation is impacting consumers’ plans for home projects across the board, and the current market conditions are more challenging than they’ve ever been before. However, there are pockets of growth retailers and brands can target generationally and regionally, with share opportunities specific to sectors, retailers, and departments.
Numerator can help you reach a deeper understanding of custom consumer segments along with other key home improvement shopper groups so you can engage with them more effectively. This deeper context allows you to confidently act on the biggest share growth opportunities by understanding both who and where those opportunities are. Get in touch to find out more.
To learn more about how local housing markets are impacting home improvement, download the full report from Numerator.
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